Management Information

Systems
Aerobotics
Aerobotics
The technology that we have developed can apply to many different
industries around the world, but it’s tough to decide which opportunities
to pursue and how to best employ our development resources.

We have quite a few early-stage clients that have become testing

clients for us in the agriculture industry, but even within a single sector,
it’s still a challenge to prioritize our development based on feedback
and requests.

—Jamie Paterson, Aerobotics CEO

Aerobotics
In December 2016, Mbwanna Alliy stepped out of his car and walked
towards the Aerobotics office in Woodstock, a Cape Town
neighborhood filled with trendy restaurants and revamped warehouses.

A gust of strong summer wind whipped around his car and ruffled the
lapels on his jacket. “Too windy for a good drone flight,” Alliy thought to
himself as he walked into the office. Alliy, a partner at the Savannah
Fund, a Nairobi-based seed capital fund focused on early-stage
technology investments in sub-Saharan Africa, was there to meet with
James Paterson, Benji Meltzer, and Andrew Burdock, the executive
team at Aerobotics.
Aerobotics
The team had spent the past two years developing Aeroview, a data
analytics platform that used satellites, drones, and artificial intelligence
to help farmers optimize crop performance and reduce costs. The firm
had built a solid client base of farmers and agricultural consultants in
South Africa and several other countries across the continent, as well
as several customers in Australia and the United Kingdom.

Now, the team hoped to raise a seed round of capital to help scale
sales and marketing operations. While the African drone market was
still in its infancy, Alliy believed the Aerobotics team had the ability to
build a successful company.
Aerobotics
In particular, he hoped that drone hardware costs would fall to
smartphone price levels, unleashing the capacity to cater to Africa’s
high number of small-scale farmers.

For a nascent company with lofty aspirations, closing a round of

funding would be a huge win. Not only would it provide Aerobotics with
much-needed financial capital and publicity, but it would also give the
team instant credibility, access to new advisors and help create
partnership opportunities.
Background
Savannah Fund
In June 2012, Mbwana Alliy founded the Savannah Fund, a seed
capital fund that specialized in $25,000 to $500,000 investments in
early-stage, high-growth technology start-ups in sub-Saharan Africa.
Initially focused on East Africa, the fund aimed to bridge the early stage
angel and venture capital investment gap that Alliy saw in Africa.

Because African markets lacked much of the infrastructure that Silicon

Valley investors require (for example, a strong technical talent pool,
reliable public infrastructure, public stock exchanges to gain liquidity,
etc.), the Savannah Fund combined venture capital with mentor
networks from both Africa and Silicon Valley. (See Exhibit 1 for a
biography of Mbwana Alliy.) Aerobotics would be the Savannah Fund’s
first drone-related investment.
Background
Savannah Fund
Background
Savannah Fund
Background
Drones
While multirotor Unmanned Aerial Vehicles (UAVs) were generally
considered the most popular type of consumer and commercial drone,
they were far from the only option available.

Depending on the situation, aerial mapping and data gathering

benefitted from several different types of UAV designs, of which there
were four main types: multirotors, fixed wing, single rotors (e.g.,
helicopters), and fixed wing hybrids for vertical takeoff and landing
(VTOL). (See Exhibit 2 for a chart of the various drone types.)
Background
Drones
Background
Drones - Multirotors
Multirotors were considered the most versatile design to lift a small
camera or sensor into the air for a short flight. Because a multirotor
could take off and land vertically, it did not require a large amount of
space or technical gear to launch. Additionally, the ability of multirotors
to hover over crops provided exceptional positioning and framing
capabilities, which were necessary for aerial data gathering.

Where multirotor UAVs excelled in versatility and hovering abilities,

they lacked in speed and endurance. This made them unsuitable for
large-scale aerial mapping or endurance flights and long-distance
monitoring.
Background
Drones - Multirotors
While battery and microprocessor technologies were continually
improving, the multirotor design was fundamentally inefficient and
required a significant amount of energy simply to stay in the air (when
compared to other more efficient designs).

The average flight time for commercial multirotors was around 20 to 30

minutes with a lightweight sensor payload. Multirotors were capable of
lifting heavier equipment, but flight times drastically suffered as a result.
Background
Drones - Fixed-wing UAVs
Fixed-wing UAVs used a wing to provide lift and horizontal rotors to
provide thrust. Since fixed-wing UAVs only used energy to provide
forward movement, they were much more efficient than multirotor
drones.

As a result, fixed-wing UAVs were better suited for capturing data over
longer distances and mapping larger areas compared to multirotors.

The main downside for fixed-wing drones was an inability to hover in

one spot, since forward movement was required to maintain flight.
Background
Drones - Fixed-wing UAVs
This made fixed-wing drones unappealing for the purpose of gathering
data flying over small farms, where a multirotor could fly much slower
and hover over areas of interest.

Additionally, fixed-wing drones required either a runway or catapult

launcher to get them into the air, and either a runway or parachute to
land.
Background
Drones - Single-rotor helicopter
While the helicopter was a popular choice for manned flight, the design
did not lend itself to UAV flights for image gathering.

A single-rotor helicopter was much more efficient compared to

multirotors, but they were more mechanically complex and could suffer
from vibration issues that could decrease image quality.

Additionally, while helicopters could hover like multirotors, they were

also more difficult to control in certain conditions and required
additional maintenance due to their complexity.
Background
Drones - Fixed-wing hybrid, vertical take-off and landing (VTOL)

VTOL drones merged the endurance benefits of fixed-wing aircraft with

the hovering capabilities of multirotors. These drones could take off and
land vertically (hence the name VTOL), and then convert to fixed-
winged flight once in the air.

Prior to the invention of modern flight computers, VTOL drones were

nearly impossible to fly safely on a consistent basis, due to the
complexity of controlling an aircraft in both fixed-winged flight and
hover modes. Because of the complexity in both design and flying,
VTOL aircraft remained a niche segment of the drone market.
However, as technology improved, companies began to bring more
VTOL drones to market.
Aerobotics
Aerobotics was an aerial mapping analytics company that specialized
in gathering aerial imagery data for use in the agricultural value chain.
The company began in early 2014 with a simple mission—to help
farmers reduce risk and make informed decisions by providing them
with new types of information.

Aerobotics got its start with a single customer—CEO James Paterson’s

parents’ farm. The original premise was simple: The team promised to
fly a drone over the farm to gather data on the health of the crops and
inspect for problem areas. At the time, consumer drones were more
like toys than commercial platforms, so the team built their own series
of UAVs and sensor systems.
Aerobotics
A few other neighbors in the area became interested in the potential to
improve their crops’ yields, so they signed up for the company’s
services. With each new client, the company built a new UAV and
sensor system, which soon became a time-intensive process that
distracted from the company’s mission of providing actionable aerial
data.

As Paterson explained: “We essentially set up a mini factory to produce

the drones. The whole process was a lot of work and we had to provide
warranties. It was distracting us from the data analytics and software
side of the product.”
Aerobotics
As consumer drone companies began to release better UAVs,
Aerobotics decided to shut down production of custom drones and
switch over to using the Phantom 4, a UAV manufactured by Chinese
technology company DJI, considered by many experts to be the
leading consumer drone manufacturer.

Paterson explained the company’s rationale: “Our plan was always to

offer an affordable and reliable solution for our clients. However, back
when we began, there wasn’t an affordable, off-the-shelf product on the
market, but we knew that was where we wanted to head. Now that
drone technology has improved, it’s helped us focus on our core
strengths of data and analytics.” (See Exhibit 3 for additional
information on the Phantom 4.)
Aerobotics
Released in March 2016 at a retail price of $1,499, the Phantom 4
boasted several significant improvements over its predecessors and
included features such as GPS, GLONASS, sonar, five separate safety
sensors, a camera gimbal, and a gyroscope.

With an estimated flight time of 30 minutes, a top speed of 72

kilometers per hour, and a control range of 7 kilometers, the Phantom
was up to the task of providing Aerobotics with a UAV platform atop
which the company could rig imagery sensors. The team estimated that
the Phantom 4 could reliably provide mapping coverage in a single
flight for farms as large as 50 hectares, or about 40,000 citrus trees.
Aerobotics
Additionally, the Phantom 4 was capable of completely autonomous
flights, which meant that a pilot could map out a flight path on a tablet
and then send the flight instructions to the Phantom, which would then
take off, capture the information, and return to the landing zone. This
autonomous process reduced the risk of crashes and poor data
gathering due to inexperienced piloting.

While the Phantom was a trustworthy and capable UAV platform,

Aerobotics still needed to find an acceptable sensor to gather crop
information. The team turned to the Sequoia, a multispectral sensor
built by the French drone company Parrot.
Aerobotics
Weighing only 107 grams, the Sequoia easily attached to the Phantom
4 and provided Aerobotics with an integrated GPS/light sensor, four
narrowband imagers, and an RGB camera for digital scouting. (See
Exhibit 4 for additional information on the Sequoia sensor.)
Aerobotics
Product and Pricing
At its core, Aerobotics was a data analytics company that sourced raw
data from drone aerial imagery. The company’s agricultural system was
a management tool that provided observations and measurements
through multispectral aerial imaging to help farmers respond to crop
stress.

While some value could be derived from a single drone session, such
as helping farmers learn the slope of their farmland, much of
Aerobotic’s use came from monitoring crop health over time. Thanks to
the Sequoia sensor, Aerobotics could monitor and track the stress
levels and other key metrics at the individual tree level.
Aerobotics
Product and Pricing
This meant that farmers could receive statistics on their orchard’s
performance and gain valuable insights such as canopy coverage, tree
counts, tree spacing, and more. (See Exhibit 5 for sample data through
Aeroview.)

Paterson explained the product: “Most of our analytics are based on

tracking changes over time, so we can detect differences month to
month and help farmers understand which areas of their crops are
improving and which part are getting worse.” Tracking field health
changes over time allowed a farmer to quickly identify areas of the field
under more stress than the rest at an early stage due to issues like
diseases and pest infestations.
Aerobotics
Product and Pricing
Aerobotics
Product and Pricing
Aerobotics
Product and Pricing
Aerobotics
Product and Pricing
Additionally, the data provided by Aerobotics helped farmers reduce
input costs such as fertilizer and water through a map layer that
indicated which parts of a field needed more inputs than others. This
meant that farmer could deploy inputs more tactically, rather than use a
more costly blanket deployment across the entire field.

Aerobotics set a scalable monthly fee for access to the service. (See
Exhibit 6 for pricing and service information.) Farmers could choose
from three tiers of service that ranged from $135 to $750 and varied
based on the amount of analyzed farmland and the addition of various
features.
Aerobotics
Product and Pricing
Aerobotics
Product and Pricing
The core Aerobotics product offered farmers elevation information,
volume metrics, zone management features, and crop analytics down
to the individual tree level. The Aerobotics team believed that this data
could be useful across a variety of crop types and farm sizes.

For example, in large field crops like corn, a farmer could target parts
of the field that were under stress or not performing as well as the rest
of the farm. For tree crops, the platform’s algorithms could
automatically detect individual tress and measure metrics such as
health, height, volume, and area at the individual tree level, which
helped farmers more accurately predict and improve yields.
Aerobotics
South African Market
With 1.2 million square kilometers of land, South Africa was one-eighth
the size of the United States, with seven climatic regions ranging from
Mediterranean to subtropical to semi-desert.

These variances, combined with 3,000 kilometers worth of coastline

served by eight commercial ports, allowed for the cultivation of a highly
diverse range of marine and agricultural products.

While 12 percent of South Africa’s land could be used for crop

production, only 22 percent of this was high-potential arable land. The
greatest limitation for agriculture in the country was the availability of
water due to unreliable rainfall.
Aerobotics
South African Market
In total, close to 1.3 million hectares of farmland are under irrigation,
accounting for around 50 percent of South Africa’s total water usage.

In the early days, the Aerobotics founders hoped to sell a combined

hardware and software product package directly to South African
farmers, as Paterson explained, “We were looking to sell to individual
farmers at first.

We thought the drones were pretty automated, so we could just get

them out into the field and the farmers would be able to fly them by
themselves.”
Aerobotics
South African Market
However, the company quickly found this was not the case since many
farmers were wary of working with the new drone technology. After an
extensive amount of deliberation, the team shifted strategies and
began searching for industry groups that had connections with
networks of farmers.

This proved to be a major pivot in the company’s strategy from

providing a turnkey solution to selling services. Aerobotics reached out
to the Sugar Cane Growers Association of South Africa, a national
organization that represented South Africa’s approximately 23,866
independent sugar cane growers that operated mainly on small family
farms in rural areas.
Aerobotics
South African Market
The member farms produced an average of 19.9 million tons of sugar
cane every year using more than 371,662 hectares of farmland. The
group provided research, training, publications, lobbying and advocacy,
and regional services to farmers across the country.

After a series of conversations and product demos, Aerobotics and the

Cane Growers Association agreed to become product-development
partners. It was clear to both parties that this relationship stood to be a
win-win for everyone involved—Aerobotics would gain access to
thousands of potential customers, and the Cane Growers Association
would have a new service that it could provide to its members.
Aerobotics
South African Market
Aerobotics hoped to use this partnership as a model for future industry
groups, in which the company could offer its services either directly to
farmers’ associations or sell through them to individual farmers.

Aerobotics planned to service these early customers through a

combination of farmer-owned drones (for larger farms), partner service
providers around South Africa, and directly through the Cane Growers
Association. Andrew Burdock explained the advantages of this
partnership: “The main benefit of the partnership is that the Cane
Growers Association markets our services through direct marketing
efforts and markets our services directly on the ground by hosting a
farmer days across the country, demonstrating the Aeroview system’s
capabilities to their member farmers.”
Aerobotics
The benefits of operating in African markets
The Aerobotics founders saw South Africa as an excellent innovation
hub where the costs to attract the region’s top talent were
comparatively lower than places like the United States and Europe.
(See Exhibit 7 for a global overview of drone start-ups.)

While the founders’ long-term vision for Aerobotics was to scale

globally, the team saw tremendous green-field opportunity in the
African markets, and hoped to leverage best practices developed in
South Africa to scale across the continent. (See Exhibit 8 for food crop
and animal production growth in Africa.)
Aerobotics
The benefits of operating in African markets
Aerobotics
The benefits of operating in African markets
Aerobotics
The benefits of operating in African markets
Compared to the United States, where there were multiple start-ups
trying to compete for the same customers, Aerobotics had
comparatively little competition in Africa. Additionally, the team saw the
opportunity to partner with several African governments that were
hoping to embrace drone technology and become hotbeds of drone
innovation.
Aerobotics
Developing a go-to-market strategy
While affordable talent costs and supportive governments were
potential benefits associated with operating in certain parts of Africa,
the continent also had its own unique set of challenges. The most
important was average farm size—in the United States, the mean farm
size was 178.4 hectares, and in Latin America, it was 11.7 hectares. In
sub-Saharan Africa, however, the average size was just 2.4 hectares.

Alliy and the Aerobotics team spent much of their conversation trying to
figure out how to tackle this challenge. Aeroview provided farmers with
actionable data, but with such a small average farm size, how could the
team sell to individual farmers in a profitable manner?
Aerobotics
Developing a go-to-market strategy
Additionally, the group wondered how the company’s support
capabilities would function at scale—how could the company continue
to provide service and support to customers with such a small average
farm size?

The team looked at the partnership they were developing with the
South African Sugar Cane Growers Association and wondered if a
similar partnership model could be used with other groups of farmers,
so the team planned to reach out to organizations that had established
relationships with farmers across the continent.
Aerobotics
Developing a go-to-market strategy
One of the most promising of these organizations was Circle Finance,
a micro-financing and micro-insurance company that that catered to
over 500,000 farmers in Africa across 16 countries, including Ghana,
Zimbabwe, and Zambia.

The company specialized in providing financing and insurance

products specifically designed for farmers who managed 1- to 3-
hectare farms. A successful partnership would help Aerobotics achieve
scale, even if only a portion of the 500,000 farmers signed up as
customers. As the team discussed the potential partnership, the
concern over how to service lots of small farms came up several times.
Aerobotics
Developing a go-to-market strategy
Alliy thought to himself, “There has to be an effective way to partner
with Circle Finance—they have access to the customers Aerobotics
needs to scale, but the team needs to be careful that they set up this
partnership in a way that doesn’t come with overly burdensome service
costs.”
Aerobotics
Drone Service Providers
In order for Aerobotics to deliver actionable data to farmers, the
company needed to fly drones over the farmland on at least a monthly
basis.

The team had already learned that building custom drones was a slow
and expensive process that they would have to avoid if they wanted to
scale across Africa.

With the memories of these challenges still fresh in their minds, the
team hoped to partner with drone pilots who could manage the process
of going out into the field and capturing data for farmers on a regular
basis.
Aerobotics
Drone Service Providers
As luck would have it, drone service providers (DSPs) were beginning
to crop up around the continent. DSPs began as small local companies
that offered drone-flying services to companies that needed to use
drones to gather data, collect samples, and capture aerial photography
and video.

In the case of Aerobotics, this meant that the company could contract
with local DSPs to manage the routine flights over customers’ farmland
to gather data. Aerobotics would, in turn, not have to worry about
building and maintaining its own fleet of drones. This meant that growth
was not limited by the company’s ability to maintain an ever increasing
fleet of UAVs— as long as there were DSPs near potential customers,
Aerobotics could service the area.
Aerobotics
Drone Service Providers
However, the quality of DSPs could vary greatly in terms of the type of
gear used and the ancillary services they provided (i.e. flight
insurance). Still, Aerobotics decided that developing a strong diligence
process around DSP partnership development would help the company
more over the long run than building a private fleet of drones.

Andrew Burdock commented, “The process of flying drones is

becoming very, very commoditized. It’s not an area that we wanted to
play in, especially because we sell a scalable system. The done
service provider business model is very much an up-and-coming
business, and we’re trying to partner with as many of these [DSPs] that
we possibly can.”
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Back in the Aerobotics offices, Alliy and the Aerobotics executives
began to outline the goals of the seed round. Since the Aerobotics
team consisted of just 12 people, many members of the team held
multiple responsibilities, as Andrew Burdock, COO explained: “I’m the
chief operating officer, but I also run sales, finance, and marketing.

We haven’t had a lot of time to focus on direct-to-market sales and

advertising, so there is a lot that needs to be done.” The team sought to
raise a seed round of capital for three main reasons—to help scale
their sales and marketing efforts to farmers across the continent,
develop new revenue opportunities, and invest further in research and
development and data science skills to improve the Aeroview platform.
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
The team believed that raising a round of capital could help them bring
on more talent and develop a direct-to-market sales strategy. (See
Exhibit 9 for global commercial drone statistics.)

Both missions came with their own set of challenges and opportunities.
At the core, however, the question was the same—how could
Aerobotics, which up until now had focused on cultivating technical
development talent—scale a business operations team that could cater
to an ever-growing list of clients?
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
When it came to growing sales capabilities, the team had to be
strategic—since the average farm size in Africa was still quite small, it
would be inefficient to hire a traditional sales team and expect them to
bring in enough business. However, the partnerships with the Sugar
Cane Growers Association and Circle Finance could help show early
signs that partnering with organizations could scale into a profitable go-
to-market strategy.

Additionally, and perhaps more importantly, the team still had to ensure
that it found true product/market fit between Aeroview and African
farmers.
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Many key questions still needed answers—such as how farmers could
measure their return on investment for using Aeroview and which
segments in the farming business could be the most profitable (e.g.,
types of crops and farm sizes).

The team also wondered whether the value proposition for Aeroview
varied depending on the size of the farm, as well as how the customer
engaged with Aerobotics (e.g., through the Sugar Cane Growers
Association or via a direct sales force).
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
As the Aerobotics team and Alliy continued discuss product/market fit
amongst various types of farmers, the group began to wonder how they
might be able to use the Aeroview platform to sell services to groups
other than farmers.

The team had done some early research in the mining industry and
discovered that aerial imagery could be used to count and measure
stockpiles and provide volumetrics data. This meant Aeroview could be
adapted to show miners how much of a particular product they had
mined by simply highlighting the pile on the map and letting Aeroview’s
algorithms calculate its total volume.
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Paterson was optimistic about Aeroview’s ability to provide actionable
data to the mining industry, but acknowledged that it could require the
company to retool its sales approach.

The team also considered applications across a broader selection of

industries, including game and cattle counting and security. “We
believe we’ve only scratched the service when it comes to adding real
value to an industry using visual data. There is so much potential to
capture as our algorithms develop and the hardware technology
improves,” explained Burdock.
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Meltzer began to wonder aloud about the potential to continue selling
within the farming sector, but to players other than farmers.

“When you think about it, there are a lot of different verticals within the
farming industry—sure we can deliver farming data to the farmer
himself, but we can also cater to the insurer, the reinsurer, financiers
and commodity traders, all within the agricultural industry.”
Forward Looking:where To Grow?
(Product Offerings, Industries And Geographies)
Alliy was impressed with the team’s reasoning. However, he also
understood that each new potential area of opportunity also came with
a new set of challenges. The seed money would certainly help, but was
the young company ready to scale into multiple industries?

Alliy wondered whether it might be better to focus on agriculture

businesses before expanding into other industries, such as mining.
Furthermore, the capital injection could certainly be used to recruit a
traditional sales force to expand sales across Africa, but would that be
profitable? Alliy and the Aerobotics team continued to ponder the
potential implications of their decisions, hopeful that a seed round
would help Aerobotics focus on finding its ideal product/market fit.